This past year was another terrific one for technology stocks in particular. Tailwinds driven by artificial intelligence (AI) helped push the S&P 500 higher by 23%, while the Nasdaq Composite gained an impressive 29%.
The “Magnificent Seven” stocks were among the year’s top gainers in the market, and perhaps no other garnered more attention than semiconductor leader Nvidia — which was the top-performing stock in the Dow Jones Industrial Average in 2024.
Last year, Nvidia gained approximately $2.1 trillion in market capitalization — the highest of any company. This propelled Nvidia to become one of the world’s most valuable businesses. While Nvidia’s current run could suggest that the stock is due for a pullback, Wedbush Securities technology analyst Dan Ives is calling for significantly more growth ahead for the AI darling — and I agree.
Let’s look at Nvidia’s latest catalysts and make the case for why 2025 could be another one for the record books.
Over the last two years, Nvidia has emerged as the leader of the pack in the AI marathon, and it all boils down to one thing: graphics processing units (GPUs). GPUs are advanced chipsets necessary for developing generative AI applications.
Nvidia’s deep roster of GPUs has helped the company separate from competitors such as Advanced Micro Devices, and acquire an estimated 90% of the GPU market.
To add some context here, Nvidia’s dominance has fueled consistent revenue and profit growth for the company — allowing it to double down on research and development (R&D) and pioneer even newer, innovative products. Enter Blackwell, Nvidia’s next-generation GPU architecture, which is reportedly already sold out for the next 12 months.
While this is more of a company-specific tailwind, Ives believes that broader investments in AI infrastructure could eclipse $1 trillion in the coming years. Nvidia is taking advantage of this windfall of rising capital expenditure (capex), underscored by investments in European GPU cluster specialist Nebius, and the acquisition of AI infrastructure business Run:ai (which it acquired for a reported $700 million).
Given the massive rise in Nvidia’s stock price, it’s a prudent idea to look at some of the company’s valuation metrics and cross-reference them against the catalysts I’ve covered above.
|
Valuation Metric |
Value as of Jan. 3 |
|---|---|
|
Price-to-earnings (P/E) ratio |
56.7 |
|
Forward P/E ratio |
48.8 |
|
Price-to-free cash flow (P/FCF) |
63.4 |
|
Price/earnings-to-growth (PEG) ratio |
1.0 |
Data source: YCharts.
